Ukraine’s Poroshenko Trying to Push Out Prime Minister Yatsenyuk

KIEV, Ukraine—President Petro Poroshenko said Wednesday he wants a new government selected next week to end a political impasse that has jeopardized financial support from Ukraine’s Western backers.

Ukrainian leaders have been in high-stakes talks on reshuffling the government for weeks after the pro-Western coalition splintered as its members traded accusations of corruption and foot-dragging on economic overhauls.

Mr. Poroshenko’s allies want to oust Prime Minister Arseniy Yatsenyuk, but have struggled to garner sufficient support in Parliament, where Mr. Yatsenyuk’s party is the second largest. The deadlock has stopped work on changes needed for the country to receive more loans from the International Monetary Fund as it struggles to recover from a recession during an armed conflict with rebels in its east.

The president said the old coalition, formed after elections in October 2014, should meet this week to agree on a candidate that he could propose to Parliament for a vote on Tuesday. Mr. Yatsenyuk said earlier Wednesday that he is waiting for a decision from Mr. Poroshenko and his party, the largest in Parliament.

The political jockeying has imperiled financial support from the West that has helped stabilize Ukraine’s creaking finances during the armed conflict, which has lasted nearly two years. IMF chief Christine Lagarde warned last month that the lender’s $17.5 billion bailout would be at risk without major new efforts to accelerate improvements to governance and tackle graft. The IMF wants changes to the tax code, privatization of state assets and measures to reduce government spending.

After Mr. Yatsenyuk survived a confidence vote last month, allies of Mr. Poroshenko have been maneuvering to oust him in favor of Finance Minister Natalie Jaresko, who was born in the U.S., or Parliamentary Speaker Volodymyr Groysman.

A senior official in the presidential administration put the chances of a new prime minister being appointed at 70%, but said Mr. Yatsenyuk could survive if a deal can’t be reached. The official said early elections should be avoided at all costs, as that would delay new IMF funding for months.

“If they are still bickering in a month or two, people would start to get nervous,” said one U.S.-based investor. A new government, even if it lasts for only a few months, could buy the country some time to secure more IMF funds, the investor added.

Mr. Yatsenyuk won’t be pushed, but is prepared to leave his post in a negotiated exit if there is clear parliamentary support for another candidate, said an adviser to the prime minister.

Ms. Jaresko, an Illinois native and the co-founder of a private-equity fund, said Tuesday that she was prepared to form a “technocratic” cabinet of people from outside of politics who would be relatively immune to pressure from Ukraine’s powerful tycoons.

But the parliamentary speaker, who is a close ally of Mr. Poroshenko, may be a more feasible candidate, according to the senior administration official, because he could form a political cabinet, including members of smaller political parties who would demand ministerial portfolios for support.

The current government, which came to power after a revolution ousted a pragmatic president in 2014, promised rapid changes to combat corruption and bureaucracy that for years have hamstrung this former Soviet republic. But changes have come slowly, and the economy minister quit last month, saying his efforts to roll back corruption had been thwarted.

Oleh Berezyuk, the leader of the pro-European Samopomich faction in Parliament, said his party wouldn’t rejoin the coalition as it doesn’t want to be used to add a veneer of respectability to a government formed under the influence of tycoons who control swaths of the country’s economy. But Mr. Berezyuk said the party could vote for a new prime minister if Parliament first moved to overhaul election legislation adopted under the previous, pro- Russian president.

Serhiy Leshchenko, a lawmaker and former investigative journalist, said the candidacy of Ms. Jaresko looks like a “smokescreen” to soothe the West before the likely selection of a new cabinet that would suit big tycoons.

Mr. Leshchenko said Parliament, dominated by businessmen and longtime politicians, isn’t suited to undertake the fundamental overhauls the country needs.

“Parliament is like a Mercedes with a Dacia engine,” he said, referring to the budget auto brand from Romania.